I have a designated digging area for my pup. It works about 90% of the time -- he's 5 months old and doesn't always follow the rules.
We cleared away the grass in a 3x5 foot area. We "salted" the area with toys and treats and buried sticks. (There are worms he likes to dig for!) We kept the area moist for a while so the smells were intensified. We redirected him to the area when he started to dig in an inappropriate place. I pretended to dig, too!